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HSG has completed more than 30 anesthesia subsidy assessments since 2011. According to a 2009 article from Becker’s Hospital Review, “Around 2000, anesthesia providers started approaching hospitals for subsidies on top of their contractual arrangements.” Additionally, a 2012 white paper by North American Partners in Anesthesia stated, “Many hospitals have expexrienced 30 to 40 percent increases in their anesthesia subsidy over the past few years, yet they may not have received any additional services for that investment. In some cases, coverage has actually gotten worse, and hospitals are left asking, ‘What have we been paying for?’” At HSG, our experience reflects both these sentiments. Not only have hospitals seen growth in an area where there used to be no additional cost (anesthesia), but now they are concerned they are not getting true value from their subsidy dollars and/or there is waste inherent in their anesthesia arrangement.
Hospitals and health systems do not want to subsidize poor operations, bad business decisions, and inefficiencies. Additionally, they do not want to subsidize a group that does not share their values and goals for efficiency, volume, superior quality, and customer satisfaction (i.e., the patients and surgeons they serve). Surgery is the one area in which hospitals and health systems can achieve a healthy margin on their patient volume. As such, anything that affects surgery should, and typically does, have their utmost attention. Anesthesia not only affects surgery; it is critical to the delivery of surgery. It is not wise to allow issues in anesthesia to linger. Doing so can be crushing to a hospital when those issues come to a head.
Because compliance is of the utmost concern for hospitals and health systems, most of HSG’s anesthesia subsidy assessments have resulted in a formal fair market value and commercial reasonableness opinion regarding a hospital or health system’s financial support of an independent anesthesia practice for the group’s provision of anesthesia and peri-operative services. However, other assessments have resulted in more than an opinion of fair market value and commercial reasonableness. Sometimes findings require a performance improvement plan with the existing anesthesia group, and sometimes findings require a complete change of direction finding new management for anesthesia.
Over the last decade, HSG’s work on this area has covered 11 different organizations. Total financial support provided by our hospital clients to their contracted anesthesia provider group has ranged from $500,000 to $3.7 million per year. The number of anesthesia providers included in HSG studies has ranged from a low of 3 to a high of 66, with an average subsidy per provider ranging from a low of $35,000 per provider to a high of $209,000 per provider.
This article will discuss the central focus of typical anesthesia subsidy reviews and appraisals—fair market value for provider salaries and benefits (total provider compensation). It will also highlight other key areas and factors that influence the level of subsidy that health care organizations provide to independent/contracted anesthesia providers. The text that follows provides an approach to holistically evaluate key factors and functions that impact the level of an anesthesia subsidy.
Originally Posted by American Health Law Association (AHLA) in April 2020. Authored by HSG Partner, Neal Barker.
